TaxTMI Updates e-Newsletter
Apr 30,2019

Composite supply - works contract (composite supply resulting in works contract) - single source responsibility / cross-fall breach clause - goods transport agency - consignment note as a qualifying condition for GTA - exemption under Notification No. 12/2017 (Sr. 18) for services by way of transportation of goods

Composite supply - works contract (composite supply resulting in works contract) - single source responsibility / cross-fall breach clause - The contractual arrangement between the JV parties (on shore supply contract and on shore services contract) is a single indivisible composite contract in the nature of a works contract. - HELD THAT: - The Authority examined the terms of the Notifications of Award and the express clauses which (i) split the project into six interdependent contracts, (ii) make the JV jointly responsible for execution of all contracts, and (iii) contain cross fall breach clauses and an express provision that notwithstanding the breakup of price the contract is to be construed as a single source responsibility contract. The goods supplied under the on shore supply contract cannot be usefully or effectively supplied without transportation, delivery and on site activities covered by the on shore services contract; the first contract is said to have "no leg" unless tied to the second. On the combined reading of these clauses and having regard to precedents recognising that cross fall breach clauses and single source responsibility indicate an indivisible turnkey/works contract, the Authority concluded that the two contracts form a composite supply constituting a works contract as defined under the GST law and are taxable as such.

Both the supply and the allied services form an indivisible composite works contract (single source responsibility) and are taxable as a works contract.

Goods transport agency - consignment note as a qualifying condition for GTA - exemption under Notification No. 12/2017 (Sr. 18) for services by way of transportation of goods - Freight/local transportation charges recovered by the applicant under the contract are not eligible for exemption under Serial No. 18 of Notification No. 12/2017 (Central and State) and are taxable. - HELD THAT: - Having held that the contractual arrangement is an indivisible composite works contract, the Authority treated transportation/freight as a component part of that composite supply (works contract) rather than as an independent service eligible for exemption. While the applicant relied on the contention that it did not issue consignment notes and therefore could not be a GTA entitled to a separate rate/exemption, the determinative finding was that transportation is ancillary and integral to the composite works contract. Consequently the transaction does not fall within the exemption at Sr. 18 of Notification No. 12/2017 and the freight component is to be taxed along with the composite works contract supply in accordance with the applicable works contract rate.

The freight charges recovered under the contract do not qualify for exemption under Sr. 18 of Notification No. 12/2017 (Central or State) and are taxable as part of the works contract composite supply.

Final Conclusion: The Authority ruled that the on shore supply and on shore services contracts form an indivisible composite works contract (single source responsibility) and, consequently, the freight/local transportation charges recovered by the applicant are not exempt under Serial No. 18 of Notification No. 12/2017 (Central or State) and are taxable.

Composite supply - works contract - principal supply - immovable property - original works - local authority - tariff classification of LED lights/fixtures

Composite supply - works contract - principal supply - immovable property - local authority - Whether the activity under the contract with Pune Municipal Corporation falls within Entry No. 3(vi)(a) of Notification No. 11/2017 (as amended) (i.e., is a composite supply constituting a works contract for original/civil works provided to a local authority). - HELD THAT: - The Authority found the contract to be a composite supply comprising supply of LED dimmable street lights/fixtures together with installation, commissioning, operation and maintenance, with the supply of goods (LEDs/fixtures) as the predominant element and therefore the principal supply. The Authority examined whether the supply could be treated as a works contract by considering whether the lighting equipment constitutes immovable property. It held that the LED fixtures, though attached to electric poles, are removable without damage (fixtures attached by nuts/bolts), and the contractual terms (including warranty and replacement obligations) indicate removable goods rather than an immovable asset. The Authority therefore declined to treat the transaction as a works contract as defined in section 2(119) and concluded that Entry No. 3(vi)(a), which covers composite works-contract-type services provided to government/local authorities in relation to original/civil works, does not apply because the impugned supply is essentially a composite supply with goods as the principal supply and not a works contract/service covered by that notification.

The activity is not covered by Entry No. 3(vi)(a) of Notification No. 11/2017 (as amended).

Tariff classification of LED lights/fixtures - The GST rate applicable to the project where the principal supply is LED lights/fixtures. - HELD THAT: - Having held that the principal supply is of goods, the Authority directed that GST be charged at the tariff rate applicable to those goods. It identified 'LED Lights or Fixtures including LED Lamps' under Sub-Heading 9405 40 90 of the GST Tariff, 2017 and applied the corresponding tax rate. Consequently, the appropriate GST rate for the applicant's supply (LED lights/fixtures) is 12%, apportioned as 6% CGST and 6% SGST.

GST rate applicable to the project is 12% (6% CGST + 6% SGST) on the LED lights/fixtures.

Final Conclusion: The Authority ruled that the contract is a composite supply whose principal supply is goods (LED lights/fixtures) and is not a works contract covered by Entry No. 3(vi)(a) of Notification No. 11/2017 (as amended); the applicable GST rate is 12% (6% CGST + 6% SGST) as per the tariff classification for LED lights/fixtures.

Tariff classification under the HSN - classification as "FRUITS, NUTS AND OTHER EDIBLE PARTS OF PLANTS, OTHERWISE PREPARED" (Chapter 20) - treatment of maize kernels mixed with oil and salt as a prepared edible part of plant - applicable GST rate consequent to HSN classification

Tariff classification under the HSN - classification as "FRUITS, NUTS AND OTHER EDIBLE PARTS OF PLANTS, OTHERWISE PREPARED" (Chapter 20) - applicable GST rate consequent to HSN classification - Classification of ready-to-cook popcorn premix (popcorn maize mixed with edible oil and salt, sold in retail packs 30 g to 350 g) under the HSN and the consequent GST rate. - HELD THAT: - The Authority examined the nature of the product imported and sold by the applicant: kernels of popcorn maize which, after cleaning and fumigation, are mixed with edible oil and salt and packed as a ready-to-use premix requiring only heating for consumption. The Authority treated the kernels as edible parts of a plant which, once mixed with oil and salt and presented as a prepared product for direct consumption, fall within the broader description of goods in Chapter 20 dealing with "FRUIT, NUTS AND OTHER EDIBLE PARTS OF PLANTS, OTHERWISE PREPARED OR PRESERVED, WHETHER OR NOT CONTAINING ADDED SUGAR OR OTHER SWEETENING MATTER OR SPIRIT, NOT ELSEWHERE SPECIFIED OR INCLUDED." Applying that classification to the facts, the Authority assigned the eight-digit subheading 20081990 (

Summary order. Notice issued returnable on 2nd May, 2019; direct service permitted.

Refund of court-deposit by Registrar - entitlement to accrued interest on invested court-deposit - liberty to file challenge against adverse administrative order - disposal of writ petition on stated terms

Refund of court-deposit by Registrar - entitlement to accrued interest on invested court-deposit - Direction to refund the amount deposited in court to the petitioner and payment of accrued interest if invested. - HELD THAT: - The Court accepted the petitioner's application seeking refund of the amount deposited with the Registrar and directed that the Registrar refund the sum to the petitioner within one week from communication of the order. Where the deposited amount has been invested by the Registrar, the petitioner is entitled to the accrued interest thereon and the Registrar must refund the principal along with such accrued interest within the same timeframe. The Court's direction implements the prayers made in the Miscellaneous Civil Application and fixes a one week period for payment following communication of the order. [Paras 3]

Registrar directed to refund the deposited amount to the petitioner within one week and to include any accrued interest if the amount was invested.

Liberty to file challenge against adverse administrative order - Grant of liberty to the petitioner to file appropriate proceedings if the authority passes any adverse order, with such proceedings to be disposed of on their merits and in accordance with law. - HELD THAT: - The Court provided the petitioner express liberty to institute appropriate proceedings to impugn any adverse order that may be passed by the administrative authority. Any such proceedings filed shall be adjudicated on their own merits and in accordance with law; this preserves the petitioner's right of challenge without predetermining the outcome of future litigation. The order thus confines the present adjudication to the refund and preserves procedural remedies for the petitioner. [Paras 4]

Petitioner granted liberty to file proceedings against any adverse order; such proceedings to be decided on merits in accordance with law.

Disposal of writ petition on stated terms - Writ petition and miscellaneous application disposed of in terms of the Court's directions with no order as to costs. - HELD THAT: - Having directed refund and granted the petitioner liberty to challenge any future adverse administrative orders, the Court disposed of the writ petition and the Miscellaneous Civil Application on those terms and declined to award costs. The order also directed that parties, including the Registrar, may act on the authenticated copy of the order, giving it operative effect. [Paras 5, 6]

Writ petition and ancillary application disposed of on the terms recorded; no order as to costs.

Final Conclusion: The Court directed immediate refund of the deposited amount to the petitioner (with accrued interest if invested), granted liberty to challenge any adverse administrative order which shall be decided on merits, and disposed of the writ petition and misc. application on these terms without costs.

Permanent establishment (dependent agent) - Royalty versus business income - Broadcast reproduction right - DTAA definition of royalties - Arm's length principle

Permanent establishment (dependent agent) - Arm's length principle - Entitlement of the Revenue to tax the assessee's advertisement and distribution revenue in India on the ground that the assessee had a permanent establishment in India - HELD THAT: - The Court noted that the question had been authoritatively considered in earlier proceedings concerning the same assessee and in SET Satellite (Singapore) Pte. Ltd., where the High Court reversed the Tribunal and accepted that, having regard to the Circular and the arm's length computation, taxable income could be computed at 10% of gross profits and advertisement receipts were not taxable in India under the treaty/CBDT Circular. The impugned Tribunal had referred to earlier assessments in which the issue was decided in favour of the assessee; accordingly the revenue's challenge on this score was not entertained as it did not require fresh adjudication. The Tribunal had moreover proceeded on an assumption of PE yet held there would be no tax liability; thus the question of characterising the receipts for taxation in India was treated as non-justiciable in the appeal before this Court.

Question relating to taxation of advertisement and distribution revenue on the ground of a permanent establishment is not entertained / rendered academic in these appeals in view of prior decisions and factual history.

Royalty versus business income - Broadcast reproduction right - DTAA definition of royalties - Whether the distribution receipts paid to the non-resident assessee constitute 'royalty' or are business income - HELD THAT: - The Court examined the nature of the arrangements and the relevant statutory and treaty definitions. The assessee did not part with copyright in any literary, dramatic, musical or artistic work, cinematograph film or sound recording; rather it received subscription-derived receipts enabling customers to view channels. Broadcast reproduction right under Section 37 of the Copyright Act is a distinct right, and the distribution agreement expressly disclaimed any grant of copyright or licence. The definition of 'royalty' in Section 9(1) and Explanation 2 and the DTAA's Article 12 were considered; the payments in issue did not fall within the statutory or treaty formulations of royalty as they were not payments for transfer or use of copyright in literary, artistic or scientific works. The Tribunal and CIT(A) findings treating the receipts as business income were upheld as correctly distinguishing commercial distribution rights from copyright consideration.

Distribution receipts are not 'royalty' but are business income; the Tribunal's and CIT(A)'s conclusions are affirmed.

Final Conclusion: The appeals are dismissed. The High Court declines to disturb the Tribunal's reliance on earlier assessments regarding taxation of advertisement and distribution revenues and upholds the finding that distribution receipts are business income and not royalty.

Waiver of interest under Section 234-B - advance tax liability - current repairs versus capital expenditure - illustrative guidelines of the CBDT Circular - discretionary power to waive or reduce interest - remand for fresh consideration

Waiver of interest under Section 234-B - illustrative guidelines of the CBDT Circular - discretionary power to waive or reduce interest - current repairs versus capital expenditure - advance tax liability - Application for waiver of interest under Section 234-B rejected by Chief Commissioner set aside and remanded for fresh consideration in light of the legal position that the claim was debatable and the CBDT guidelines are illustrative - HELD THAT: - The Court held that the CBDT Circular's illustrations (para 2(c)) are not exhaustive traps but examples to guide the designated authority; where an assessee has a genuinely debatable claim (here, whether replacement of rings and frames qualified as allowable revenue expenditure or 'current repairs') and had succeeded up to the High Court, the liability to pay advance tax to that extent could not be treated as an admitted liability automatically attracting uncompromising application of interest. The power to waive or reduce interest under Section 234-B is discretionary and must be exercised fairly and objectively on the facts of each case. The Chief Commissioner, when considering the waiver application, ought to have considered that the issue was highly debatable and that the assessee had consistently prevailed before the High Court; failure to consider this aspect rendered the exercise of discretion incomplete. Consequently the orders rejecting the waiver were set aside and the matter remitted to the Chief Commissioner for fresh decision in accordance with law. [Paras 10, 11, 12, 13]

Order dated 26.02.2009 of the Chief Commissioner and the Single Judge's order dated 21.02.2014 are set aside; matter remanded to the Chief Commissioner to reconsider the waiver application for Assessment Year 1992-93 afresh and in accordance with law.

Final Conclusion: Writ appeal allowed; orders rejecting waiver of interest under Section 234-B set aside and matter remanded to the Chief Commissioner for fresh, fair and objective consideration of the assessee's waiver application for Assessment Year 1992-93; no order as to costs.

Setting aside ex-parte order - non-service of notice - insufficient address endorsement by postal authorities - restoration of appeal - Rule 24 of the Appellate Tribunal Rules, 1963 - section 254(2) of the Income Tax Act, 1961

Section 254(2) of the Income Tax Act, 1961 - Miscellaneous application filed by the assessee was within the statutory time limit. - HELD THAT: - The Tribunal noted that the impugned order dated 21.06.2017 was received by the assessee on 17.08.2007 and, accordingly, the miscellaneous application filed on 09.02.2018 fell within the time-frame envisaged in section 254(2) of the Income Tax Act, 1961. The Court accepted the assessee's representation on receipt dates and treated the application as timely for the purposes of seeking relief. [Paras 1]

The miscellaneous application was held to be within time.

Non-service of notice - insufficient address endorsement by postal authorities - setting aside ex-parte order - restoration of appeal - Rule 24 of the Appellate Tribunal Rules, 1963 - Ex-parte order dated 21.06.2017 was set aside and the appeal was restored because the assessee did not receive notice of the hearing due to postal endorsement of insufficient address. - HELD THAT: - The authorized representative produced documentary evidence obtained from the Registrar showing the notice of hearing was returned by postal authorities with an endorsement of "insufficient address." The Tribunal found that the assessee inadvertently did not receive notice of the hearing and therefore did not appear. Applying the principles of fairness and Rule 24 of the Appellate Tribunal Rules, 1963, the Tribunal concluded that the ex-parte order should be set aside and the appeal restored for fresh hearing. The departmental representative's objection was considered but did not outweigh the proved non-service. [Paras 2, 4, 6]

The ex-parte order was set aside and the appeal restored; registry directed to list the appeal for fresh hearing.

Final Conclusion: The Tribunal allowed the miscellaneous application as timely, set aside the ex-parte order of 21.06.2017 on the ground of non-service (postal endorsement of insufficient address), and restored the assessee's appeal for rehearing under Rule 24 of the Appellate Tribunal Rules, 1963.

Rectification under Sec. 254(2) of the Income Tax Act - mistake apparent on record - review of Tribunal order - limitations on exercise of rectification powers

Rectification under Sec. 254(2) of the Income Tax Act - mistake apparent on record - review of Tribunal order - Application under Sec. 254(2) seeking correction of the Tribunal's order on the ground of a mistake apparent from record. - HELD THAT: - The Tribunal had considered the cross appeals for A.Y. 2012-13 and, after deliberation, upheld the CIT(A)'s view by restricting additions in respect of purchases from three concerns to 3% of aggregate purchases (contrasted with the A.O.'s 12.5% figure). The assessee's miscellaneous application contended that the Tribunal omitted to account for the assessee's gross/net profit margins and therefore its order contained a mistake apparent on the record. The Bench observed that the statutory power under Sec. 254(2) is confined to correcting glaring, patent and obvious errors appearing on the face of the record and cannot be employed as a vehicle to review or re-open deliberative conclusions reached on merits. Since the present application in substance sought a review of the Tribunal's considered order rather than pointing to a clear, obvious clerical or demonstrable error, the application was not maintainable under Sec. 254(2). [Paras 4, 5]

Application under Sec. 254(2) dismissed as an impermissible attempt to review the Tribunal's order rather than a rectifiable mistake apparent on the record.

Final Conclusion: The miscellaneous application seeking rectification of the Tribunal's order was dismissed because the grievance amounted to a review of a deliberated decision, which cannot be permitted under Sec. 254(2) absent a glaring, patent mistake on the face of the record.

Disallowance under section 14A - No disallowance if no exempt income (Essar Teleholdings) - Section 41(1) - cessation of liability and addition - Capital liabilities versus trading liabilities - Deemed dividend under section 2(22)(e) - Requirement of beneficial shareholding to attract section 2(22)(e)

Disallowance under section 14A - No disallowance if no exempt income (Essar Teleholdings) - Deletion of disallowance under section 14A upheld where assessee did not earn any exempt income. - HELD THAT: - The CIT(A) deleted the disallowance made by the AO under section 14A on the ground that the assessee had not earned any exempt income in the year. The Tribunal applied the settled principle in Essar Teleholdings that section 14A disallowance cannot be made where no exempt income is claimed or earned, and found no infirmity in the appellate order. The revenue did not controvert the factual position that no exempt income arose. [Paras 2]

Revenue's ground on section 14A dismissed.

Section 41(1) - cessation of liability and addition - Capital liabilities versus trading liabilities - Deletion of addition under section 41(1) in respect of sundry creditors upheld. - HELD THAT: - The AO treated 19 creditors as ceased liabilities and added their balances under section 41(1) because opening and closing balances showed no movement. The assessee demonstrated these were capital-account creditors relating to ongoing construction (work in progress), no deduction or allowance had been claimed earlier, and liabilities continued to exist. The CIT(A) found that limitation or dormancy does not establish cessation, and that section 41(1) applies only where the assessee has, by conduct, manifested intention not to pay. The Tribunal observed these factual findings were uncontested by the revenue and affirmed deletion of the addition. [Paras 3, 5]

Revenue's grounds relating to section 41(1) dismissed.

Deemed dividend under section 2(22)(e) - Requirement of beneficial shareholding to attract section 2(22)(e) - Deletion of addition on account of deemed dividend under section 2(22)(e) upheld because the assessee was not a shareholder of the lending company. - HELD THAT: - The AO treated an advance from Muchhala Magic Land Pvt. Ltd. as deemed dividend under section 2(22)(e), relying on common shareholding. The assessee produced the shareholders' list of the lending company and established it was not a shareholder. The Tribunal held that being a shareholder (beneficial holder with requisite interest) is a primary condition for attracting section 2(22)(e). Relying on the jurisprudence cited by the parties, the Tribunal found no need to decide the distinction between current and loan accounts because the absence of shareholding precluded invocation of section 2(22)(e). The CIT(A)'s deletion was affirmed. [Paras 8, 10, 12]

Revenue's ground on deemed dividend under section 2(22)(e) dismissed.

Final Conclusion: All appeals filed by the revenue for A.Y.2012-13 and A.Y.2013-14 are dismissed; the appellate findings deleting additions under sections 14A, 41(1) and 2(22)(e) are upheld.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Minimum Alternate Tax (MAT) regime under section 115JB - CBDT Circular No.25/2015 dated 31-12-2015 - non-levy of penalty where tax under normal provisions is less than tax under MAT for assessments prior to 1-4-2016 - Prospective application of substituted Explanation 4 to section 271 (w.e.f. 1-4-2016)

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Minimum Alternate Tax (MAT) under section 115JB - CBDT Circular No.25/2015 dated 31-12-2015 - Imposition of penalty under section 271(1)(c) could not be sustained where, for the assessment year in question, tax payable under section 115JB (MAT) exceeded tax payable under the normal provisions and the CBDT circular of 31-12-2015 is applicable. - HELD THAT: - The Tribunal found that the assessment resulted in tax liability being determined under section 115JB and that the tax payable under MAT (book profits) exceeded the tax payable under the normal provisions. CBDT Circular No.25/2015, dated 31-12-2015, expressly states that for cases prior to 1-4-2016 penalty under section 271(1)(c) is not attracted with reference to additions/disallowances made under the normal provisions where the tax on total income computed under normal provisions is less than the tax payable under section 115JB. The Circular had been issued before the assessment order and was in force at the time the penalty order was passed; it therefore binds the revenue authorities. Applying that settled position, the Tribunal held that the penalty confirmed by the Commissioner (Appeals) could not be levied in the facts of the case. As relief was granted on this ground, the Tribunal did not examine the merits of the underlying addition/disallowance. [Paras 4, 5]

Penalty under section 271(1)(c) set aside and the appeal allowed.

Final Conclusion: The appeal is allowed: the penalty imposed under section 271(1)(c) was quashed because, for A.Y.2013-14, tax under the MAT provision (section 115JB) exceeded tax under the normal provisions and CBDT Circular No.25/2015 precludes levy of such penalty in cases prior to 1-4-2016; the Tribunal did not decide the merits of the addition/disallowance.

Weighted deduction under section 35(1)(ii) - Explanation to section 35 protecting donor against subsequent withdrawal of approval - Effect of retrospective withdrawal of approval on donor's entitlement - Reliance on survey/investigation material to deny deduction - Interest under section 234B consequential

Weighted deduction under section 35(1)(ii) - Explanation to section 35 protecting donor against subsequent withdrawal of approval - Effect of retrospective withdrawal of approval on donor's entitlement - Reliance on survey/investigation material to deny deduction - Whether the assessee-donor was entitled to claim weighted deduction under section 35(1)(ii) for donations made to SHGPH despite subsequent retrospective withdrawal of SHGPH's approval, and whether the AO/CIT(A) could deny the deduction based on survey/investigation material. - HELD THAT: - The Tribunal examined that SHGPH had been recognized by CBDT at the time the assessee made the donations and that CBDT later issued a notification withdrawing recognition with retrospective effect. The Explanation to section 35(1)(ii) (introduced with retrospective effect) provides that deduction shall not be denied to the payer merely because approval granted to the recipient was withdrawn subsequent to the payment. The assessee furnished documentary evidence of payment (account-payee cheques, bank statements, receipts) and records of SHGPH's recognition/approvals. The Tribunal followed the coordinate-bench decision in DCIT v. M/s Maco Corporation (India) Pvt. Ltd. and other precedents, and applied the statutory Explanation to hold that a subsequent retrospective withdrawal of recognition does not affect the donor's entitlement to deduction. The Tribunal therefore rejected the AO's reliance on survey statements as a basis to deny the deduction and directed grant of the weighted deduction for both assessment years. Other merits-based arguments were left open. [Paras 6]

Assessee entitled to deduction under section 35(1)(ii) for the donations to SHGPH for A.Y.2013-14 and A.Y.2014-15; disallowance set aside and AO directed to allow the claimed weighted deduction.

Interest under section 234B consequential - Whether interest under section 234B requires separate adjudication. - HELD THAT: - The Tribunal observed that charging of interest under section 234B is consequential to the disposal of the main issue and does not require separate substantive adjudication in view of the decision allowing the deduction. [Paras 7]

Interest under section 234B to be considered and adjusted consequentially; no independent adjudication required.

Final Conclusion: Both appeals are allowed: the disallowances under section 35(1)(ii) are deleted and the claimed weighted deductions for A.Y.2013-14 and A.Y.2014-15 are directed to be granted; consequential interest to be adjusted.

Validity of penalty under section 271(1)(c) of the Income Tax Act, 1961 - Requirement of specificity in notice under section 274 - Distinction between concealing particulars of income and furnishing inaccurate particulars of income - Principles of natural justice in penalty proceedings - Independence of penalty proceedings from assessment proceedings

Validity of penalty under section 271(1)(c) of the Income Tax Act, 1961 - Requirement of specificity in notice under section 274 - Distinction between concealing particulars of income and furnishing inaccurate particulars of income - Principles of natural justice in penalty proceedings - Penalty under section 271(1)(c) struck down because the show cause notice under section 274 did not specify whether penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal followed the reasoning of the co ordinate bench and the principles laid down by the Karnataka High Court that a notice under section 274 must specifically state the ground under section 271(1)(c) - whether for concealment or for furnishing inaccurate particulars - because the two limbs are distinct and initiation and imposition of penalty must be confined to the grounds specified in the notice. A printed proforma listing all possible grounds without striking out the inapplicable ones does not satisfy the requirement of law and offends principles of natural justice. Initiation of proceedings on one limb and imposing penalty on another is impermissible. Applying that principle to the present case, the Assessing Officer's notice failed to indicate the specific limb and therefore the penalty could not be sustained. The Tribunal declined to address other merits since the show cause notice defect was dispositive.

Penalty imposed under section 271(1)(c) quashed and Assessing Officer directed to delete the penalty.

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) for assessment year 2010-11 is cancelled because the show cause notice under section 274 did not specifically state the ground of penalty, rendering the imposition contrary to the requirements of natural justice.

Invalidity of penalty imposed under section 271(1)(c) for defective show cause notice - requirement that a notice under section 274 specify whether the charge is concealment of particulars of income or furnishing inaccurate particulars - preferential application of the view favourable to the assessee where two judicial views conflict

Invalidity of penalty imposed under section 271(1)(c) for defective show cause notice - requirement that a notice under section 274 specify whether the charge is concealment of particulars of income or furnishing inaccurate particulars - Whether the penalty imposed under section 271(1)(c) can be sustained where the show cause notice under section 274 did not specify whether the proceedings were for concealment of particulars of income or for furnishing inaccurate particulars. - HELD THAT: - The Tribunal examined the show cause notice dated 10.02.2016 and found that the Assessing Officer had not struck out the inapplicable portion and therefore the notice did not specify the precise charge-concealment or furnishing inaccurate particulars. Relying on the coordinate bench decision in Jeetmal Choraria and the view of the Hon'ble Karnataka High Court in Manjunatha Cotton & Ginning Factory (as accepted by earlier decisions and followed where two conflicting views exist, the one favourable to the assessee must be followed), the Tribunal held that a penalty under section 271(1)(c) cannot be sustained if the mandatory show cause notice under section 274 fails to disclose the specific charge. The Tribunal distinguished authorities relied upon by the Revenue which permit substantial compliance where the charge is otherwise discernible, and observed that in the present record there was no clear indication in the assessment order that the AO had recorded satisfaction specifying concealment as opposed to inaccurate particulars. For these reasons the defect in the notice vitiated the penalty proceedings and warranted deletion of the penalty. [Paras 5]

Penalty imposed under section 271(1)(c) deleted as the show cause notice under section 274 did not specify whether the charge was concealment of particulars of income or furnishing inaccurate particulars.

Final Conclusion: Both appeals for AYs 2013-14 and 2014-15 are allowed and the penalty under section 271(1)(c) confirmed by the CIT(A) is deleted because the show cause notice under section 274 did not specify the charge, rendering the penalty proceedings unsustainable.

Rectification under Section 254(2) of the Income tax Act - mistake apparent on the face of the record - review v. rectification (no inherent power to review) - books results cannot be disregarded in absence of invocation of Section 145(3) - profit forgone is not expenditure and cannot be taxed as such - capitalisation of presumed marketing expense/intangible without basis impermissible - lifting the corporate veil not permissible on mere possibility of hidden transaction - irrelevance of belatedly filed documents not forming basis of assessment - controlled transaction / related party fac ade must be basis of assessment before being relied upon

Rectification under Section 254(2) of the Income tax Act - mistake apparent on the face of the record - review v. rectification (no inherent power to review) - Whether the Tribunal should recall and rectify its order under Section 254(2) on the basis of documents and contentions not forming the basis of the assessment or earlier appeals. - HELD THAT: - The Tribunal reiterated that its power under Section 254(2) is confined to rectifying mistakes apparent on the face of the record and does not extend to reviewing its own order. An alleged error that requires extended reasoning or raises debatable points cannot be characterised as a mistake apparent on the face of the record. The documents now sought to be relied upon were neither the basis of the AO's assessment nor of the CIT(A)'s conclusions, were not relied upon at the appeal, and the MA attempted to raise a new basis (possible hidden/controlled transaction) after final adjudication. The Revenue offered no explanation of how these belated documents would demonstrate a mistake apparent on the face of the record or how they would have affected the issues decided by the Tribunal. [Paras 11, 12, 13, 14]

MA dismissed; rectification refused as the material relied on was irrelevant to the issues decided and the request amounted to impermissible review rather than a permissible rectification.

Books results cannot be disregarded in absence of invocation of Section 145(3) - profit forgone is not expenditure and cannot be taxed as such - capitalisation of presumed marketing expense/intangible without basis impermissible - Whether the AO was justified in disregarding the assessee's books, imputing a higher sale price, treating the difference as expenditure to create intangible assets and capitalising the same. - HELD THAT: - The Tribunal had held that the starting point for assessing business income is the profit or loss as per the assessee's profit and loss account and that the AO could not ignore book results unless provisions akin to Section 145(3) were invoked. The Tribunal rejected the AO's approach of imputing a notional higher sale price and treating the forgone profit as an expenditure incurred for creation of intangible assets/goodwill, observing there was no material to show income had in fact been earned or that an expenditure had been incurred. Valuation exercises and capitalisation premised on such assumptions were thus unsustainable. The MA did not produce material that would undermine these conclusions. [Paras 5, 11]

Tribunal's conclusion accepting the loss declared in the books and rejecting AO's capitalisation and additions sustained; no basis to disturb that conclusion.

Lifting the corporate veil not permissible on mere possibility of hidden transaction - irrelevance of belatedly filed documents not forming basis of assessment - controlled transaction / related party fac ade must be basis of assessment before being relied upon - Whether the Agreements filed belatedly by Revenue warranted lifting the corporate veil or reopening the Tribunal's findings. - HELD THAT: - The Agreements tendered for the first time in the MA were neither relied upon by the AO nor formed part of the grounds on which the CIT(A) or the Tribunal reached their conclusions. The Bench queried and the Revenue failed to show how these documents were relevant to the assessment issue that had been decided. The Tribunal held that an attempt to reopen by asserting a possible hidden transaction, unsupported by the record of assessment or earlier proceedings, cannot be entertained in a rectification petition. Lifting the corporate veil requires a foundation in the record and cannot be invoked on the basis of speculation. [Paras 9, 11]

Belated reliance on the Agreements rejected as irrelevant; no ground for rectification or for lifting the corporate veil.

Final Conclusion: The Miscellaneous Application under Section 254(2) is dismissed. The Tribunal held that rectification power is limited to mistakes apparent on the face of the record, the Revenue cannot raise a new basis of assessment or rely on belated documents not forming part of the assessment proceedings, and the Tribunal's earlier acceptance of the assessee's book loss and rejection of AO's capitalisation of presumed marketing/intangible expenditure is sustained.

Revision under section 263 - permissible only where assessment order is erroneous and prejudicial to revenue and not where a reasonable view has been taken - allowability of deduction for provision for leave encashment where tax paid pending final adjudication - claim payable if tax is paid in accordance with interim Supreme Court directions - deductibility of foreign taxes under section 37(1) where foreign tax credit under treaty provisions is not available - treatment of foreign tax for computation of book profit under section 115JB - scope of Explanation 1 and Explanation 2 to section 115JB - debatable questions of law and inadmissibility of revision under section 263

Revision under section 263 - permissible only where assessment order is erroneous and prejudicial to revenue and not where a reasonable view has been taken - allowability of deduction for provision for leave encashment where tax paid pending final adjudication - claim payable if tax is paid in accordance with interim Supreme Court directions - Whether the Commissioner was justified in treating the assessing officer's allowance of provision for leave encashment as erroneous and prejudicial to the revenue and directing its withdrawal under section 263. - HELD THAT: - The Tribunal examined the facts that the assessee had made specific disclosures and submissions before the AO, drawing attention to the Annexure-12 tax-audit disclosure and to the Supreme Court's interim directions in Exide Industries. The assessee had paid tax and had specifically informed the AO that the provision was made post payment of taxes in line with the Supreme Court orders. The Tribunal relied on the second interim order of the Supreme Court which permitted payment of tax as if section 43B(f) were on the statute-book while preserving the right to claim deduction in returns. On these facts the AO adopted one permissible view after enquiries and documentary disclosures; the CIT's contrary view based on the earlier interim stay did not render the assessment order per se erroneous and prejudicial. Given the submissions and the Supreme Court interim framework, the Tribunal held the CIT's direction to withdraw the allowance untenable and allowed the ground of appeal. [Paras 3]

The CIT's revision under section 263 in respect of the provision for leave encashment was not justified; the allowance made by the AO is upheld.

Deductibility of foreign taxes under section 37(1) where foreign tax credit under treaty provisions is not available - debatable questions of law and inadmissibility of revision under section 263 - Whether the foreign income-tax paid in Spain (balance not given credit under section 90) was correctly allowed as a deduction under section 37(1) and whether the CIT could direct its disallowance under section 263. - HELD THAT: - The Tribunal noted that the AO's order followed the view taken by the Bombay High Court in Reliance Infrastructure that, on the facts, tax paid abroad on income attributable to India could be allowable as expenditure and that the question had been the subject matter of substantial questions of law admitted before the High Court (as in Tata Sons). As the issue involved a debatable question of law and attracted competing judicial views (including a jurisdictional High Court decision and admission of substantial question), the Tribunal held that revisionary proceedings under section 263 were not maintainable. Consequently, the AO's allowance-being in conformity with a tenable view-was to be sustained. [Paras 4]

The direction to withdraw the allowance of foreign tax paid in Spain was set aside; the deduction under section 37(1) as allowed by the AO is upheld.

Treatment of foreign tax for computation of book profit under section 115JB - scope of Explanation 1 and Explanation 2 to section 115JB - whether foreign tax paid outside India is required to be added back in book profit computation - Whether the income-tax paid in Spain (debited to profit and loss account) was required to be added back in computing book profit under section 115JB pursuant to Explanation 1 and Explanation 2 to that section. - HELD THAT: - The Tribunal analysed Explanation 1 and Explanation 2 to section 115JB and concluded that only the categories of taxes specifically listed in Explanation 2 fall to be added back while computing book profit. Reliance was placed on earlier Tribunal decisions and the CBDT Explanatory Circular to the Finance Act, 2008 amendments. The Tribunal held that foreign tax paid outside India, which is not one of the specified items in Explanation 2, is not mandatorily required to be added back to book profit under section 115JB; Rule 128 (and related notifications) merely provide a mechanism for foreign tax credit and do not expand the scope of taxes enumerated in Explanation 2. [Paras 5]

The CIT's direction to add back the foreign tax paid in Spain while computing book profit under section 115JB is not sustained; the allowance as made by the AO is upheld.

Final Conclusion: For Assessment Year 2011-12 the Tribunal allowed the appeal: the Commissioner's revisionary directions under section 263 in respect of (i) the provision for leave encashment, (ii) the deduction of foreign tax paid in Spain, and (iii) the addition of such foreign tax to book profits under section 115JB were set aside and the AO's allowances were restored.

Transfer pricing - comparability analysis - selection and exclusion of comparables - arm's length price - working capital adjustment - FAR analysis - admission of additional ground - remand for verification

Selection and exclusion of comparables - comparability analysis - Exclusion of Thirdware Solution Ltd from the final set of comparables. - HELD THAT: - The Tribunal examined the annual report of Thirdware Solution Ltd and found that, although a large portion of its sales comprised multiple streams (sale of licence, software services, export and subscription revenue), there was no segmental reporting to enable identification of the relevant segmental performance. The Tribunal held that absence of segmental accounts renders the company unsuitable as a comparable for bench marking the assessee's international transactions; while it disagreed with the CIT(A)'s reasoning that super normal profits alone justified exclusion, it upheld exclusion on the ground of lack of segmental reporting. [Paras 29, 30]

Thirdware Solution Ltd excluded from the final set of comparables for want of segmental reporting.

Selection and exclusion of comparables - comparability analysis - Exclusion of L & T Infotech Ltd from the final set of comparables. - HELD THAT: - The Tribunal noted that the TPO had originally excluded L & T Infotech Ltd on account of related party transactions. Inclusion of L & T in the final comparables was therefore unwarranted. The Tribunal agreed with the assessee and directed exclusion of L & T from the final set of comparables. [Paras 21, 31]

L & T Infotech Ltd excluded from the final set of comparables.

Working capital adjustment - remand for verification - Grant of working capital adjustment and remand for fresh computation and verification by the TPO. - HELD THAT: - The Tribunal accepted the assessee's contention that working capital adjustment is permissible even for a service provider and found that the assessee had filed a detailed working. It followed a coordinate bench decision recognising that differences in trade receivables and payables warrant working capital adjustment to neutralise their effect on profitability. The Tribunal directed the assessee to furnish a fresh, detailed working of the working capital adjustment and remitted the same to the TPO for examination and decision. [Paras 23, 32, 33]

Working capital adjustment to be granted; assessee to furnish fresh working and TPO to examine and decide (matter remitted for verification).

Admission of additional ground - transfer pricing - Admission and adjudication of Revenue's additional ground seeking inclusion of Infosys as a comparable. - HELD THAT: - The Tribunal admitted the additional ground notwithstanding availability of statutory remedies under sections 154 or 263, observing that those remedies do not preclude the Revenue from raising an additional ground before it. On merits, however, the Tribunal found no basis to accept the Revenue's plea that non inclusion of Infosys was merely inadvertent; the TPO's fresh search and selection indicated intentional non inclusion, and the CIT(A) could not have included Infosys absent a grievance from the assessee. Accordingly, the Tribunal rejected the Revenue's contention and did not direct inclusion of Infosys. [Paras 37, 38, 39, 40]

Additional ground admitted but rejected on merits; Infosys not included as a comparable.

Final Conclusion: The Revenue's appeal and the assessee's cross objections are dismissed: Thirdware Solution Ltd and L & T Infotech Ltd are excluded from the comparables; working capital adjustment is allowed subject to fresh working to be furnished by the assessee and verification by the TPO; the Revenue's additional ground to include Infosys is admitted but rejected on merits; cross objections not pressed are dismissed.

Penalty under section 271(1)(c) - concealment of income - voluntary disclosure of income during assessment proceedings - bonafide/inadvertent mistake - detection by assessing officer

Penalty under section 271(1)(c) - concealment of income - voluntary disclosure of income during assessment proceedings - bonafide/inadvertent mistake - detection by assessing officer - Whether penalty under section 271(1)(c) is attracted where additional income was offered during assessment on the basis of the assessee's own consolidated financial statements to rectify an inadvertent mistake and there is no record of detection by the Assessing Officer. - HELD THAT: - The assessee filed two sets of profit and loss accounts for separate periods and its return reflected income for only the earlier period due to an inadvertent mistake. During assessment proceedings the assessee furnished both profit and loss accounts, prepared a consolidated computation for the entire year and offered the additional income representing the later period to tax. There is no material to show that the additional income was disclosed as a result of any investigation or detection by the Assessing Officer; the addition was made by the AO on the basis of financial statements and computation prepared and furnished by the assessee itself. In these circumstances the Tribunal found that the understatement arose from a bonafide/inadvertent mistake and the subsequent offer of the additional income constituted a voluntary rectification rather than concealment or furnishing of inaccurate particulars attracting penal consequence under section 271(1)(c). [Paras 6, 7]

Penalty under section 271(1)(c) cancelled and the assessee's appeal allowed.

Final Conclusion: The Tribunal held that where additional income was offered voluntarily during assessment to rectify an inadvertent mistake and not as a result of detection by the AO, section 271(1)(c) penalty does not apply; the penalty imposed was cancelled and the appeal allowed.

Definition of "asset" under wealth-tax law with effect from 01.04.1993 - exclusion of commercial establishments or complexes from 'asset' - application of amended statutory definition to assessment-year specific determination - remand to the Income Tax Appellate Tribunal for fresh consideration in accordance with amended law

Definition of "asset" under wealth-tax law with effect from 01.04.1993 - exclusion of commercial establishments or complexes from 'asset' - application of amended statutory definition to assessment-year specific determination - Whether the Income Tax Appellate Tribunal's decision that leased factory building and motor cars were subject to wealth-tax should stand, having regard to the amended definition of 'asset' effective 01.04.1993 - HELD THAT: - The High Court found that the Tribunal had followed an earlier decision of this Court without taking into account the post-1993 amendment introducing the definition of 'assets' under Section 2(ea) of the Wealth-tax Act, which expressly excludes properties in the nature of commercial establishments or complexes. Noting that this amended statutory position was not considered by the Tribunal, the Court declined to decide the substantial question of law on the merits and directed that the appeal be restored to the Income Tax Appellate Tribunal for fresh adjudication. The Tribunal is to consider the applicability of the amended definition to the facts of the case (including whether the hospital and its equipments constitute a commercial establishment or complex) and decide the appeal in accordance with law. [Paras 7, 8]

Order of the Tribunal dated 15.09.2006 set aside and the matter remanded to the Income Tax Appellate Tribunal for fresh consideration in accordance with the amended definition of 'asset' effective 01.04.1993, limited to Assessment Year 1998-1999.

Final Conclusion: The Tribunal's order is set aside and the appeal is restored to the Income Tax Appellate Tribunal for reconsideration in light of the definition of 'asset' inserted with effect from 01.04.1993; the court makes no observation on the merits and disposes of the Tax Case Appeal with no order as to costs.

Condonation of delay - decision on merits - delay due to serious illness and business collapse - affidavit not rebutted by Revenue

Substantial question of law - No substantial question of law arises from the order under challenge. - HELD THAT: - The High Court examined the appeal and concluded that the matters raised did not amount to a substantial question of law warranting interference. The Court therefore declined to frame or entertain any substantial question of law from the Tribunal's order and proceeded to deal with the matter on equitable grounds.

The Court found that no substantial question of law arises.

Condonation of delay - decision on merits - delay due to serious illness and business collapse - affidavit not rebutted by Revenue - Order of the Tribunal dismissing the appeal as time-barred is set aside and the appeal is remitted for decision on merits. - HELD THAT: - Having considered the affidavit filed in support of the delay condonation application, the Court accepted the explanation that the principal person managing the company suffered serious health ailments, the company incurred sustained business losses and assets were taken over, which resulted in prolonged non-prosecution and inordinate delay of 3599 days. The Revenue failed to place any material to rebut those averments. Applying a lenient and sympathetic approach, the Court set aside the Tribunal's order dismissing the appeal as barred by time and requested the Tribunal to decide the appeal on its merits in accordance with law.

Tribunal's order dated 04.12.2008 is set aside and the matter is remitted to the Tribunal to decide the appeal on merits.

Final Conclusion: The High Court, while holding that no substantial question of law arises, set aside the Tribunal's dismissal of the appeal as time-barred and directed that the appeal be decided on merits by the Tribunal; no order as to costs.

Corporate Insolvency Resolution Process initiation - existence of debt and default - Admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Public announcement of corporate insolvency resolution process - Supply of essential goods and services during moratorium - Exceptions to moratorium for transactions notified by Central Government

Existence of debt and default - Admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Company petition filed under Section 7 of the IBC admitted on proof of debt and default - HELD THAT: - The Tribunal examined the documents placed by the financial creditor, including the sanction letter, loan agreement, hypothecation and charge particulars, affidavit-cum-undertaking and bank statements evidencing partial repayment. On that material the Bench was satisfied that a debt existed and that the corporate debtor had committed default. Having reached that conclusion, the petition under Section 7 was held to be fit for admission.

The Section 7 company petition is admitted and the corporate insolvency resolution process is initiated.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Supply of essential goods and services during moratorium - Exceptions to moratorium for transactions notified by Central Government - Appointment of Interim Resolution Professional - Public announcement of corporate insolvency resolution process - Reliefs and directions attendant to admission: declaration of moratorium, its scope and duration, requirement of public announcement, and appointment of an Interim Resolution Professional - HELD THAT: - Upon admission the Tribunal declared the moratorium and specified its operative prohibitions, including restraint on institution or continuation of suits or execution of judgments, transfer or disposal of assets, enforcement of security interests and recovery of property by owners or lessors. The order preserved continued supply of essential goods and services during the moratorium and noted that the statutory moratorium would not apply to transactions notified by the Central Government in consultation with financial sector regulators. The moratorium was directed to operate from 12.03.2019 until completion of the CIRP, approval of a resolution plan or an order for liquidation. The Bench also directed immediate public announcement as required under the Code and appointed an Interim Resolution Professional to perform the functions specified in the Code, with fees to follow IBBI regulations. Finally, the Registry was directed to communicate the order to the parties and the IRP.

Moratorium declared with the stated scope and effect from 12.03.2019; public announcement mandated; Mr. Arumugam Arumugam appointed as Interim Resolution Professional; registry to communicate the order.

Final Conclusion: The petition under Section 7 of the IBC is admitted: CIRP is initiated, moratorium declared with specified scope and duration, public announcement directed and an Interim Resolution Professional appointed; registry ordered to notify the parties and the IRP.

Commercial wisdom of the Committee of Creditors (CoC) - non-interference with commercial decision of the CoC - challenge to rejection of resolution plan under Section 60(5) of the I&B Code, 2016 - feasibility and realisibility of a resolution plan - requirement to record reasons by CoC and reliance on evaluation matrix

Commercial wisdom of the Committee of Creditors (CoC) - non-interference with commercial decision of the CoC - challenge to rejection of resolution plan under Section 60(5) of the I&B Code, 2016 - The Applicant's challenge under Section 60(5) to the CoC's rejection of its resolution plan. - HELD THAT: - The Tribunal applied the principle that the commercial wisdom of the CoC is given paramount status and is ordinarily not subject to judicial review. Relying on the Supreme Court's exposition in K. Sashidhar, the adjudicatory authorities do not have power to reverse a CoC's collective commercial decision except on the narrow statutory grounds expressly available to challenge a plan. The reasons recorded by the CoC pointing to commercial un-viability, significant haircut to creditors, and concerns about antecedent transactions legitimately bear upon feasibility and realisibility; such commercial conclusions justify rejection and are not amenable to interference by the Resolution Professional or the Adjudicating Authority. Consequently, the Resolution Applicant has no vested right to compel acceptance of its plan and the petition challenging rejection is without merit. [Paras 7, 8, 9]

The challenge under Section 60(5) is rejected; the CoC's commercial decision to reject the plan is upheld.

Requirement to record reasons by CoC and reliance on evaluation matrix - feasibility and realisibility of a resolution plan - Whether the CoC was obliged to adhere strictly to the Evaluation Matrix/Expression of Interest or to record reasons in a particular manner when rejecting the plan. - HELD THAT: - The Tribunal examined the contention that the CoC's rejection must strictly follow the Evaluation Matrix or that reasons outside that matrix are impermissible. It held that while feasibility and realisibility are material considerations for the CoC, the CoC is not required to record reasons in any specific form so as to enable judicial substitution of its commercial judgment. Non-recording of detailed reasons for a commercial decision does not vitiate the collective decision of the CoC; if the objection falls within the narrowly circumscribed statutory grounds provided by the code, it must be specifically raised, otherwise mere allegations of reliance on extraneous considerations do not justify interference. [Paras 3, 7, 8]

No specific procedural infirmity in the CoC's manner of reaching and recording its commercial decision is found; adherence to the Evaluation Matrix or detailed reasons is not a ground for setting aside the rejection.

Final Conclusion: The Application challenging rejection of the Resolution Plan is dismissed as devoid of merit; the CoC's commercial decision to reject the plan is upheld and there is no order as to costs.

Financial debt - default - admission under Section 7 of the Insolvency and Bankruptcy Code - moratorium - public announcement and submission of claims - appointment of Interim Resolution Professional - prohibition on institution or continuation of suits and enforcement actions during moratorium - recovery or enforcement of security interest

Financial debt - default - admission under Section 7 of the Insolvency and Bankruptcy Code - Whether the Financial Creditor proved existence of a financial debt and default thereby justifying admission of the Section 7 application. - HELD THAT: - The Financial Creditor produced the loan agreement, renewal letter, a deed of settlement containing the Corporate Debtor's undertaking and a statement of account showing the outstanding amount. The proceedings continued ex parte after service attempts, publication and e-mail. Having considered the documents and the uncontroverted facts pleaded by the Financial Creditor, the Adjudicating Authority held that the Financial Creditor established both that a financial debt was due and payable by the Corporate Debtor and that the Corporate Debtor had committed default. On that basis the Section 7 application was admitted. [Paras 6, 8, 9, 10]

Section 7 application admitted as the Financial Creditor proved financial debt and default.

Moratorium - prohibition on institution or continuation of suits and enforcement actions during moratorium - public announcement and submission of claims - Declaration and scope of moratorium and requirement of public announcement on admission of CIRP. - HELD THAT: - Upon admission of the Section 7 application the Adjudicating Authority declared a moratorium under the IBC and directed public announcement of the initiation of the Corporate Insolvency Resolution Process and the call for submission of claims. The order set out the prohibitions during moratorium, including institution or continuation of suits, transfer or encumbrance of assets, actions to enforce security interests and recovery of property occupied by the Corporate Debtor, and directed that supply of essential goods or services not be terminated during the moratorium. The moratorium is to operate from the date of admission until completion of the CIRP, subject to cessation on approval of a resolution plan or an order of liquidation.

Moratorium declared; public announcement and claims process to be carried out; scope and effect of moratorium as specified in the order.

Appointment of Interim Resolution Professional - payment of advance fees to IRP - Appointment of the Interim Resolution Professional and related directions. - HELD THAT: - The Financial Creditor proposed a candidate for the Resolution Professional and the Adjudicating Authority, finding no record of disciplinary proceedings against him, appointed the proposed professional as Interim Resolution Professional to ascertain particulars of creditors and convene the Committee of Creditors. The Authority directed payment of an advance fee to the IRP as per the applicable IBBI regulations and required the IRP to conduct the CIRP in a time bound manner. Registry was directed to communicate the order to the parties and the IRP by speed post and e-mail. [Paras 10]

Proposed candidate appointed as Interim Resolution Professional; advance fees to be paid and CIRP to be conducted in a time bound manner.

Final Conclusion: The Section 7 petition filed by the Financial Creditor was admitted; moratorium was declared and public announcement ordered; the proposed Resolution Professional was appointed as Interim Resolution Professional with directions for payment of advance fees, communication of the order and time bound conduct of the CIRP; matter listed for progress report.

Admission under Section 10 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - Moratorium under Section 14 - Appointment of Interim Resolution Professional - Proof of default - Public announcement and claims process - Prohibition on institution or continuation of suits and enforcement actions - Supply of essential goods or services during moratorium - Duties and cooperation to the Interim Resolution Professional

Admission under Section 10 of the Insolvency and Bankruptcy Code, 2016 - Proof of default - The Section 10 application filed by the corporate debtor is admitted on account of proved default and fulfilment of statutory requirements. - HELD THAT: - The record contains documentary evidence of indebtedness and inability to service loans, including provisional profit and loss statement showing losses, bank communications indicating overdue amounts and cessation of cash credit operations, and pendency of a civil recovery suit. Objections raised by one financial creditor did not negate the evidence of default or otherwise supply sufficient ground to refuse admission. The corporate debtor had proposed an Interim Resolution Professional with consent in Form-2 and satisfied the procedural requisites for admission. Applying the statutory test for admission under Section 10, the Tribunal found that default had occurred and the application met the requirements for initiating the insolvency process. [Paras 7, 8, 9, 10, 11]

Application under Section 10 is admitted and corporate insolvency resolution process is initiated.

Appointment of Interim Resolution Professional - Public announcement and claims process - Moratorium under Section 14 - Prohibition on institution or continuation of suits and enforcement actions - Interim Resolution Professional is appointed, public announcement and claims procedure directed, and moratorium declared with specified prohibitions. - HELD THAT: - Having admitted the Section 10 application, the Tribunal appointed Mr. Mathur Sabhapathy Viswanathan as Interim Resolution Professional after noting absence of disciplinary proceedings against him. The IRP was directed to take charge of the corporate debtor's assets and management immediately and to make the public announcement and call for submission of claims as prescribed. The moratorium was declared to have effect from the date of the order until completion of the CIRP and the order set out the statutory prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security including actions under SARFAESI, and recovery by owners or lessors. The Tribunal also protected supply of essential goods or services during the moratorium as provided by the Code. [Paras 11, 12, 13, 15]

Mr. Mathur Sabhapathy Viswanathan is appointed IRP; public announcement and claims process directed; moratorium declared with statutory prohibitions and protection for essential supplies.

Duties and cooperation to the Interim Resolution Professional - Directives issued to the directors, promoters and persons associated with management to cooperate with the IRP and compliance obligations of the IRP were specified. - HELD THAT: - The Tribunal directed the IRP to comply with specific provisions of the Code relating to functions and duties and required the directors, promoters and persons associated with the management of the corporate debtor to extend assistance and cooperation to the IRP for discharge of his functions. Registry and the corporate debtor were directed to provide the IRP with a copy of the order for compliance, and IRP contact details were recorded to facilitate compliance. [Paras 14, 15]

Directives issued for IRP's compliance with statutory duties and for cooperation by directors, promoters and management; registry and corporate debtor to send copy of the order to the IRP.

Final Conclusion: The Tribunal admitted the corporate debtor's Section 10 application, commenced the Corporate Insolvency Resolution Process, appointed an Interim Resolution Professional with directions to make the public announcement and invite claims, declared moratorium with the statutory prohibitions and protection for essential supplies, and directed cooperation with the IRP.

Commencement of liquidation under the Insolvency and Bankruptcy Code - appointment of the liquidator - role and duties of the liquidator including public notice - committee of creditors' decision to liquidate upon failure to receive or approve a resolution plan - liquidator's liberty to seek directions from the Adjudicating Authority

Commencement of liquidation under the Insolvency and Bankruptcy Code - committee of creditors' decision to liquidate upon failure to receive or approve a resolution plan - Liquidation of the corporate debtor is ordered under Section 33(1) of the Code as no resolution plan was received or approved during the corporate insolvency resolution process. - HELD THAT: - The Tribunal recorded that during the entire resolution period claims were received but no resolution plan was received or approved and the Committee of Creditors concurred with the Resolution Professional that resolution was not possible. On that basis the application under Section 33(1) was allowed and the process of liquidation was directed to commence from the date of the order. The order embodies the Tribunal's exercise of power to initiate liquidation where the CoC concludes that a resolution is not feasible. [Paras 7, 9]

Application under Section 33(1) allowed and liquidation of the corporate debtor ordered to commence from the date of the order.

Appointment of the liquidator - transition of the resolution professional to liquidator under the Code - The Resolution Professional appointed during CIRP is to be termed and to act as the Liquidator under Section 34(1) of the Code. - HELD THAT: - The Bench recorded the appointment of the Interim Resolution Professional earlier in the process, his confirmation as Resolution Professional by the CoC, and his subsequent unwillingness to continue as Liquidator. Notwithstanding the stated unwillingness, the Tribunal directed that the then Resolution Professional be termed as the Liquidator as per the statutory provision, thereby effecting the transition required on commencement of liquidation. [Paras 1, 3, 8, 9]

The Resolution Professional is to be termed and shall function as the Liquidator under Section 34(1) of the Code.

Role and duties of the liquidator including public notice - notification to the concerned authority where the debtor is registered - liquidator's liberty to seek directions from the Adjudicating Authority - Ancillary directions were issued for the conduct of the liquidation: the Liquidator must publish advertisement of liquidation, the order must be forwarded to the authority with which the debtor is registered, and the Liquidator may seek directions from the Tribunal during the liquidation process. - HELD THAT: - On ordering liquidation the Tribunal specified operational directions to implement the liquidation process: public advertisement as required by the Code, communication of the order to the relevant registration authority, and an express grant of liberty to the Liquidator to seek further directions from the Bench if necessary. These directions are procedural and ancillary to commencement of liquidation to secure compliance and supervision. [Paras 9]

The Liquidator shall advertise the liquidation, the order shall be forwarded to the concerned registration authority, and the Liquidator is at liberty to seek directions from the Bench during the liquidation process.

Final Conclusion: The Tribunal allowed the application under Section 33(1), ordered commencement of liquidation, directed that the incumbent Resolution Professional be termed as Liquidator under Section 34(1), and gave ancillary procedural directions including public advertisement, forwarding the order to the concerned authority, and liberty for the Liquidator to seek the Tribunal's directions.

Treatment of investment in mutual funds as "trading in goods" / "trading in securities" - classification of services as exempted services for Cenvat credit reversal - application of Rule 6(2) and Rule 6(3) of the Cenvat Credit Rules, 2004 - requirement of nexus between input(s)/input services and exempted activity for denial/reversal of Cenvat credit - distinction between capital investment activity and business/trading activity for tax treatment

Treatment of investment in mutual funds as "trading in goods" / "trading in securities" - distinction between capital investment activity and business/trading activity for tax treatment - Whether the appellant's purchase and redemption of mutual fund units amounted to "trading in goods"/"trading in securities" and therefore constituted exempted services liable to denial of Cenvat credit. - HELD THAT: - The Tribunal accepted the factual and documentary material showing that the appellant made purchases of mutual fund units as investments to manage surplus funds and liquidity, redeeming them only when funds were required for operational needs. The activity was found to be investment in mutual funds and not a regular, continuous business of buying and selling of securities. Consequently, the returns were treated as capital gains and not business income. The departmental characterisation of the transactions as "trading" was rejected because the appellant was not engaged in the business of trading in securities; the transactions were incidental liquidity-management investments rather than an ordinary course trading operation.

The purchase and redemption of mutual fund units by the appellant are investment activities and do not amount to "trading in goods" or "trading in securities"; they are not exempted services in the sense alleged by the Department.

Application of Rule 6(2) and Rule 6(3) of the Cenvat Credit Rules, 2004 - requirement of nexus between input(s)/input services and exempted activity for denial/reversal of Cenvat credit - Whether reversal of Cenvat credit under Rule 6(3) was warranted where common input services were allegedly used for both taxable and exempted services (trading in mutual funds). - HELD THAT: - The Commissioner (Appeals) had upheld a demand under Rule 6(3) on the premise that common input services were used for both taxable services and exempted services (trading in mutual funds) and that the appellant had neither maintained separate accounts under Rule 6(2)(b) nor complied with Rule 6(3)(i)/(ii). The Tribunal found that the Department failed to establish any nexus between the common input services (such as works contract, interior decorator and design services, architect services) and the investment activity in mutual funds. Because the inputs/input services were not shown to have been used in or in relation to the alleged exempted activity, the statutory precondition for invoking Rule 6(3) was absent. Accordingly, the reversal and demand under Rule 6(3) could not be sustained.

Rule 6(3) could not be applied as the Department did not prove that the common input services were used for the exempted activity; therefore reversal of credit on that basis was not sustainable.

Final Conclusion: The impugned orders confirming demand and reversal of Cenvat credit were set aside: the appellant's mutual fund transactions were held to be investment activity (not trading) and there was no proved nexus between common input services and any exempted activity, hence Rule 6(3) did not apply and the appeal was allowed with consequential relief.

Liability to pay interest on mere availment of CENVAT credit - interest under Rule 14 of the CENVAT Credit Rules, 2004 - penalty under Rule 15(1) of the CENVAT Credit Rules, 2004 - reversal of CENVAT credit before utilization - precedential effect of jurisdictional High Court and Tribunal larger bench decisions

Liability to pay interest on mere availment of CENVAT credit - interest under Rule 14 of the CENVAT Credit Rules, 2004 - reversal of CENVAT credit before utilization - precedential effect of jurisdictional High Court and Tribunal larger bench decisions - Whether interest under Rule 14 is payable where the assessee had only availed CENVAT credit which was not utilized and sufficient credit remained in the books during the relevant period. - HELD THAT: - The Tribunal held that the question is no longer res integra and is governed by the decision of the Karnataka High Court in Bill Forge (as cited) and the Larger Bench of the Tribunal in J.K. Tyres, which establish that mere availment of CENVAT credit, not followed by utilization, does not attract interest under Rule 14. The Tribunal noted consistent decisions of the CESTAT following that ratio and observed that where credit is reversed before utilization and there was sufficient CENVAT credit in the assessee's books during the relevant period, interest is not imposable. Applying those precedents to the admitted facts of the present case-that the appellant only availed credit which remained unutilized-the Tribunal concluded that the demand of interest confirmed by the authority below was unsustainable. [Paras 6]

The demand of interest under Rule 14 confirmed by the adjudicating authority is set aside and the appeal is allowed with consequential relief.

Penalty under Rule 15(1) of the CENVAT Credit Rules, 2004 - reversal of CENVAT credit before utilization - precedential effect of jurisdictional High Court and Tribunal larger bench decisions - Whether penalty under Rule 15(1) can be sustained where the credit availed was not utilized and was reversed prior to utilization. - HELD THAT: - Relying on the same line of decisions that preclude imposition of interest where credit was not utilized, the Tribunal observed that penalty under Rule 15(1) likewise cannot be sustained in the circumstances of this case. The Tribunal accepted that the Commissioner (Appeals) had enhanced penalty from the nominal amount imposed by the adjudicating authority, but in light of the precedential holdings that reversal before utilization negates the basis for interest and penalty, the enhanced penalty was not maintainable. Consequently, the Tribunal set aside the order enhancing penalty. [Paras 6]

The order enhancing penalty under Rule 15(1) is set aside and the appellant's appeal is allowed with consequential relief.

Final Conclusion: Appeals allowed; impugned orders confirming interest under Rule 14 and enhancing penalty under Rule 15(1) set aside, following the jurisdictional High Court and Tribunal larger bench precedents that bar interest and penalty where CENVAT credit was only availed, remained unutilized and was reversed before utilization.

Interest on delayed refund - automatic grant of interest under Section 11BB - deemed order for refund by an appellate authority - eligibility for rebate under Rule 5 of Export of Services Rules, 2005 read with Notification No. 11/2005-ST - remand to adjudicating authority for verification of documents

Interest on delayed refund - automatic grant of interest under Section 11BB - deemed order for refund by an appellate authority - Whether the Commissioner (Appeals) was justified in granting interest along with directing remand, i.e., entitlement to interest on delayed refund when the appellate authority remits the matter for verification. - HELD THAT: - The Tribunal held that grant of interest by the Commissioner (Appeals) together with remand was legally sustainable. The reasoning follows the Supreme Court's construction in Ranbaxy Laboratories Ltd., that the explanation below the proviso to Section 11BB creates a deeming fiction whereby an order for refund made by an Appellate Authority is to be treated as an order made under the relevant provision for purposes of interest. Accordingly, once the Commissioner (Appeals) found that the refund claim was in proper order and directed verification of conditionalities, the concomitant direction for interest on delayed refund was not irregular. The Tribunal therefore found no infirmity in the Commissioner (Appeals) granting interest even while remanding the claim for verification. [Paras 5, 6]

Grant of interest by the Commissioner (Appeals) alongside remand is confirmed.

Eligibility for rebate under Rule 5 of Export of Services Rules, 2005 read with Notification No. 11/2005-ST - remand to adjudicating authority for verification of documents - Whether the Commissioner (Appeals) correctly remanded the matter to the jurisdictional Assistant/Deputy Commissioner for verification of documents to test fulfilment of conditions for rebate under Rule 5. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s approach that, on the material before him, the respondent had exported services and accumulated CENVAT credit and that only the conditionalities under Rule 5 required verification. The Commissioner (Appeals) directed the jurisdictional authority to verify requisite documents relating to CENVAT credits (with specific exclusions already upheld). The Tribunal found that remand for such verification was appropriate and that the appeal before the Tribunal could not be allowed merely to upset a remand which did not finally decide entitlement on merits. [Paras 2, 5, 6]

Remand to the adjudicating authority for verification of conditions under Rule 5 is confirmed and appropriate.

Final Conclusion: The appeal is dismissed; the Order-in-Appeal dated 08.08.2018 is confirmed insofar as it grants rebate subject to verification of documents under Rule 5 and awards interest on delayed refund.

Service tax liability - mandap keeper services - admission before adjudicating authority - clandestine provision of taxable services - penalty for concealment and failure to discharge tax - raising new factual plea at second appeal

Service tax liability - mandap keeper services - admission before adjudicating authority - Appellant was liable to pay service tax on Mandap Keeper Services and had accepted such liability before the authorities. - HELD THAT: - The Tribunal noted that officers' verification and the director's statement established that the appellant was providing Mandap Keeper Services and receiving consideration without raising bills. The appellant did not contest the demand before the original adjudicating authority and expressly accepted liability and sought time to deposit the tax, which was deposited. On these facts the Deputy Commissioner rightly confirmed the service tax demand; the appellate authority also recorded that the assessee had not contested the liability. The factual admissions and conduct before the authorities formed the basis for upholding the tax demand. [Paras 2, 3, 7]

Tax demand in respect of Mandap Keeper Services confirmed and sustained.

Raising new factual plea at second appeal - admission before adjudicating authority - Appellant's contention that the Mandap premises were rented to a third person could not be entertained at the second appeal stage and was not established prima facie. - HELD THAT: - The appellant did not invoke the plea of having rented out the Mandap before the authorities below and failed to produce any particulars or name of any third party when asked. The Tribunal held that this was a factual contention which could not be permitted to be raised for the first time at the second appeal stage, and observed that no prima facie material had been placed to substantiate the alleged lease to a third person. [Paras 5, 6, 7]

Pleas of letting out the Mandap to a third person disallowed at the second appeal stage and rejected for want of evidence.

Clandestine provision of taxable services - penalty for concealment and failure to discharge tax - Penalties imposed for concealment/default were upheld as the case involved clandestine activity rather than a question of legal interpretation. - HELD THAT: - The Tribunal observed that the facts disclosed clandestine receipt of consideration for Mandap Keeper Services without payment of service tax. Given the admitted provision of services and non-disclosure, the imposition of penalties by the lower authorities was justified. The Tribunal found no merit in the assessee's plea for setting aside penalties where the matter was not one of legal interpretation but of concealment of taxable activity. [Paras 3, 4, 7]

Penalties confirmed and sustained by the Tribunal.

Final Conclusion: Both appeals by the assessee are rejected; the service tax demand and the penalties imposed in respect of Mandap Keeper Services are sustained as the appellant had admitted the liability, failed to raise the factual plea before lower authorities, and no prima facie evidence was produced to overturn the findings of clandestine taxable activity.

Service tax under reverse charge mechanism - services rendered by employee excluded from levy of service tax - employer-employee relationship - whole-time director as employee and key managerial personnel under the Companies Act - deduction of tax at source under Section 192 of the Income Tax Act - penalty and interest not leviable where primary demand is set aside

Service tax under reverse charge mechanism - services rendered by employee excluded from levy of service tax - employer-employee relationship - whole-time director as employee and key managerial personnel under the Companies Act - deduction of tax at source under Section 192 of the Income Tax Act - Whether remuneration (including variable commission) paid to whole-time directors is liable to service tax under reverse charge or is to be treated as salary exempt from service tax - HELD THAT: - The Tribunal found on facts that the persons in question are whole-time directors, a status recognized by the Companies Act which treats a whole-time director as in whole-time employment and as key managerial personnel, and that such directors may be officers in default for company non-compliance. The characterisation as whole-time directors establishes an employer-employee relationship between the company and those directors. The assessee deducted TDS under Section 192 of the Income Tax Act treating the payments as salaries, and produced Form 26AS evidence of such TDS. The Tribunal held that the mere fact that remuneration includes a variable component in the form of commission does not negate the employment relationship or convert the payments into taxable services. Applying the principle that payments treated as salary by the Income Tax Department and subjected to TDS as salary cannot be recharacterised as consideration for a taxable service, the Tribunal relied on earlier tribunal decisions to reinforce that consideration paid to whole-time directors is remuneration in the nature of salary and not a taxable service. In view of these findings, the demand of service tax under reverse charge on remuneration paid to whole-time directors cannot be sustained. [Paras 6, 7, 8]

Demand of service tax on remuneration paid to whole-time directors set aside; corresponding interest and penalty also unsustainable.

Final Conclusion: The appeal is allowed: service tax demand for the period August 2012 to March 2013 on remuneration paid to whole-time directors is quashed, with consequential reliefs; interest and penalty are also set aside.

Manufacture - trading activity versus manufacturing activity - reliance on documents recovered during search - remand for fresh adjudication - burden to connect documentary evidence to production premises

Reliance on documents recovered during search - trading activity versus manufacturing activity - burden to connect documentary evidence to production premises - Whether the demand of duty quantified in Annexure C, based on production slips recovered from the trading premises at Bhilwara, can be upheld as proof of manufacture by the appellant. - HELD THAT: - Annexure C to the show-cause notice is a summary of the slips recovered from the trading premises of M/s Baheti Dyechem at Bhilwara. The Commissioner upon fresh adjudication examined those slips and recorded that they mentioned inputs such as water and MECT and that there was no evidence connecting those slips to production carried out at the appellant's factory premises; the Commissioner therefore treated the slips as relating to trading activity and not production. Because the entire demand quantified in Annexure C is premised solely on those slips, and the Commissioner has discredited their link to manufacturing at the appellant's factory, the material relied upon in the SCN fails to prove manufacture by the appellant. The Tribunal accordingly found that the demand could not be sustained on the basis of Annexure C and allowed the appeal. [Paras 6, 7]

Demand based on Annexure C (summary of slips recovered at Bhilwara) cannot be upheld as proof of manufacture; appeal allowed.

Final Conclusion: The Tribunal set aside the demand founded on Annexure C because the recovered slips were held by the adjudicating authority to relate to trading, not production at the appellant's factory; consequently the appeal is allowed.

Inclusion of second stage handling charges in transaction value - ex-works / ex-factory sale and passing of title at factory gate - transaction value for computation of jute cess - freight/transportation charges as separate non-transactional costs - penalty under Rule 25(1) read with Section 11AC(1)(a)

Inclusion of second stage handling charges in transaction value - ex-works / ex-factory sale and passing of title at factory gate - transaction value for computation of jute cess - Whether second stage handling charges charged separately by the assessee on sales effected through DGS&D must be included in the transaction value for calculation of jute cess when sales are at ex-factory/FOR station of despatch - HELD THAT: - The Tribunal held that where sales are ex-works/ex-factory and title passes at the factory gate - as evidenced by invoicing at factory, payment of sales tax by the assessee at dispatch, and delivery terms indicating sale at factory gate - amounts charged subsequently as freight/second stage handling for transportation from factory to railway/siding are not part of the transaction value. Reliance was placed on the settled principle in the cited Supreme Court precedents which establish that when goods are sold ex-works and the seller no longer retains any right of disposal on handing over to the transporter, subsequent transportation/handling charges are separate and not includible in the assessable value for excise/jute cess purposes. Applying that principle to the facts of supplies through DGS&D, the Tribunal concluded that the second stage handling charges need not be included in the transaction value for computing jute cess.

Second stage handling charges are not includible in the transaction value for calculating jute cess in the facts of this case; the impugned demand is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed; impugned adjudication confirming demand and equal penalty set aside as the second stage handling charges charged separately on ex-factory sales through DGS&D are not includible in the transaction value for jute cess.

Appeal to the Commissioner (Appeals) within sixty days - condonation of delay within a further period of thirty days under the first proviso to Section 35(1) of the Central Excise Act - no power to condone delay beyond the further period of thirty days - exclusion of Section 5 of the Limitation Act for condonation beyond statutory period

Appeal to the Commissioner (Appeals) within sixty days - condonation of delay within a further period of thirty days under the first proviso to Section 35(1) of the Central Excise Act - no power to condone delay beyond the further period of thirty days - exclusion of Section 5 of the Limitation Act for condonation beyond statutory period - Whether the Commissioner (Appeals) could condone the delay in filing the appeal which was presented after the further period of thirty days following the initial sixty-day period. - HELD THAT: - The Court construed the proviso to Section 35(1) of the Central Excise Act and held that an appeal must ordinarily be filed within sixty days from the date of communication of the order and that the Commissioner (Appeals) may, if satisfied that the appellant was prevented by sufficient cause, admit the appeal within a further period of thirty days. The statutory language confines the power to condone delay to that additional thirty-day window and thereby excludes any reliance on Section 5 of the Limitation Act to extend time beyond that period. The Supreme Court's decision in Singh Enterprises was applied as authoritative on this point: the appellate authority has no power to condone delay after the expiry of the further thirty days. Since the present appeal was filed after both the initial sixty days and the additional thirty-day period, the Commissioner (Appeals) rightly dismissed it as time-barred; the decision relied upon by the appellant did not address or override the statutory proviso and was therefore inapplicable. [Paras 9, 10, 11, 12]

The Commissioner (Appeals) correctly rejected the appeal as barred by time because it was filed after the further period of thirty days and no condonation beyond that period is permissible.

Final Conclusion: Appeal dismissed - the appeal was time-barred as it was filed after the sixty-day period and also beyond the further thirty-day period allowed by the proviso to Section 35(1), and the Commissioner (Appeals) had no power to condone delay beyond that further thirty days.

CENVAT credit on inputs used for fabrication, repair and maintenance of capital goods - burden of proof under Rule 9 of CENVAT Credit Rules - sufficiency of documentary evidence for utilisation of inputs - one-to-one traceability not required in absence of sophisticated inventory tracking

CENVAT credit on inputs used for fabrication, repair and maintenance of capital goods - Entitlement to CENVAT credit on MS channels, angles, plates and sheets used in fabrication/repair/maintenance of capital goods for the period prior to 07.07.2009. - HELD THAT: - The Tribunal observed that the question whether materials used for fabrication and maintenance of capital goods are eligible for CENVAT credit in the period before 07.07.2009 is no longer res integra and has been decided in favour of the appellant in earlier CESTAT-Hyderabad precedent. Applying that view to the facts of this appeal, the Tribunal held that the appellant is entitled to CENVAT credit on the materials in question used in the factory for maintenance/repair of capital goods. [Paras 4]

Appellant entitled to CENVAT credit on the materials used for fabrication/repair/maintenance of capital goods.

Burden of proof under Rule 9 of CENVAT Credit Rules - sufficiency of documentary evidence for utilisation of inputs - one-to-one traceability not required in absence of sophisticated inventory tracking - Whether the documents produced by the assessee (invoice-wise sheets from the Finance Department) sufficiently prove that the materials were used in fabrication/maintenance of capital goods despite inability of the Manager (Works) to identify individual items. - HELD THAT: - The Tribunal examined the departmental contention that Rule 9 requires proof of use and noted the Assistant Commissioner's report that the Manager could not point to specific usage. It accepted the practical reality that precise one-to-one tracing of individual sheets or angles from particular invoices into specific repairs is generally impracticable unless the factory maintains a sophisticated inventory tracking system. The Tribunal found that the invoice-wise allocation sheets produced by the Finance Department, showing receipt and allotment to divisions, satisfactorily demonstrate utilisation in maintenance/repair and meet the requirement of proof under the circumstances of this case. [Paras 5]

The Finance Department sheets constitute sufficient proof of utilisation and entitle the appellant to credit; strict one-to-one traceability is not required in the factual matrix of this case.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the appellant is held entitled to CENVAT credit on the materials used for fabrication/repair/maintenance of capital goods in the factual matrix presented.

Eligibility to avail Cenvat credit on goods used in or in relation to manufacture - Interpretation of the definition of 'input' and 'capital goods' under the Cenvat Credit Rules, 2004 - Goods used for foundations and structural supports as integral part of capital goods - Precedential effect of Larger Bench rulings in classification of inputs/capital goods

Eligibility to avail Cenvat credit on goods used in or in relation to manufacture - Interpretation of the definition of 'input' and 'capital goods' under the Cenvat Credit Rules, 2004 - Goods used for foundations and structural supports as integral part of capital goods - Whether Cenvat credit was admissible on M.S. plates, bars, angles, tors, channels and sheets used for foundations/structural works though not expressly covered under the definition of capital goods in the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal applied the Larger Bench decision in Mangalam Cement Ltd., which construed the definition of 'input' to include goods "used in or in relation to manufacture of final products", directly or indirectly, and held that goods used in manufacture of capital goods and goods serving as foundations/structural supports for machinery fall within the scope of 'input' or as accessories to 'capital goods'. The Tribunal relied on the reasoning that goods used to erect foundations and to support plant and machinery are integral to such capital goods and therefore eligible for cenvat benefit. In light of the Mangalam Larger Bench ruling and the Chhattisgarh High Court's decision in Vandana Global (as applied), the Tribunal held that the appellant's availing of credit on the specified iron and steel items was permissible. The remand for re-quantification by the earlier Division Bench was complied with and the Commissioner (Appeals) was directed to allow the quantifiable credit; the remaining disputed credit was held admissible. [Paras 2, 3]

Credit on the specified iron and steel items used for foundations/structural works is admissible as inputs or accessories to capital goods; the appeal is allowed and the impugned order set aside.

Final Conclusion: The appeal is allowed; the appellant is entitled to Cenvat credit on the specified iron and steel items used for foundations/structural supports in the factory for the period December 2001 to April, 2003, and the impugned order is set aside with consequential benefits in accordance with law.

Excisability of fabricated goods having distinct name, character and use - benefit of site-fabrication exemption - benefit of exemption for tsunami-affected construction materials available to voluntary organisations - confiscation and redemption under Rule 25 of Central Excise Rules - penalty and interest under Section 11AC

Excisability of fabricated goods having distinct name, character and use - Structural steel goods fabricated away from site are excisable as marketable goods having distinct name, character and use. - HELD THAT: - The Tribunal accepted the reasoning of earlier authorities that steel structures fabricated from raw materials according to specific designs acquire a distinct name, character and use and are marketable; such fabricated goods are therefore chargeable to central excise duty. It was not disputed that the goods fall under chapter heading 7308 and that they were marketable and marketed. The Tribunal applied these principles to hold that the fabricated structural material manufactured in Visakhapatnam is excisable. [Paras 5, 6]

Goods fabricated off-site are excisable as marketable fabricated goods and not entitled to non-excisability treatment.

Benefit of site-fabrication exemption - benefit of exemption for tsunami-affected construction materials available to voluntary organisations - Exemption under Notification No. 3/2005-CE (site-fabricated goods) and Notification No. 32/2005-CE (tsunami relief materials) does not cover the appellant's manufacture of off-site fabricated structures. - HELD THAT: - Notification No. 3/2005-CE exempts goods fabricated at the site of work; the Tribunal found the site of work to be in Andaman & Nicobar Islands while the appellant fabricated the goods in Visakhapatnam, thus excluding them from that exemption. Notification No. 32/2005-CE was held to be directed to specified beneficiaries (voluntary organisations, NGOs etc.) and, in any event, required the manufacturer to pay duty at clearance; the appellant as manufacturer could not claim the benefit. The Tribunal therefore concluded that the appellant was not entitled to the claimed exemptions. [Paras 5, 6]

Claimed exemption notifications do not apply to the appellant's off-site fabricated goods; exemption claims rejected.

Confiscation and redemption under Rule 25 of Central Excise Rules - penalty and interest under Section 11AC - The Commissioner's orders confirming demand, ordering confiscation with option of redemption on payment of fine, and imposing interest and mandatory penalty under Section 11AC are sustainable. - HELD THAT: - The appellant had not obtained central excise registration and had manufactured and cleared excisable goods; goods seized were provisionally released and later confiscated with permission to redeem on payment of a redemption fine. The Tribunal found no infirmity in the Commissioner's determination of duty demand, the modest quantum of redemption fine, or in applying interest and the mandatory penalty under Section 11AC. Consequently, there was no reason to interfere with the impugned orders. [Paras 3, 4, 7]

Order confirming duty, confiscation with redemption, and imposition of interest and penalty upheld.

Final Conclusion: The impugned order of the Commissioner is upheld; the appeal is dismissed.

Raw material versus consumable - Ballarpur Industries test - eligibility for exemption notification No. 23/2003-CE - precedent of coordinate Tribunal Benches

Raw material versus consumable - Ballarpur Industries test - eligibility for exemption notification No. 23/2003-CE - Epoxy resin and ager used in polishing granite slabs are consumables and not raw materials for the purpose of entitlement to notification No. 23/2003-CE, and therefore the manufacturer (100% EOU) is eligible for the exemption when clearing such goods to DTA. - HELD THAT: - Both parties relied on the test laid down by the Apex Court in Ballarpur Industries to determine whether an ingredient qualifies as a raw material - namely, whether the ingredient is so essential to the manufacturing process that the end product cannot come into existence without it and it is consumed in the process. The Revenue contended that epoxy resin and ager satisfy that test; the appellant contended they are mere consumables used only to fill fissures and finish slabs and that slabs can be produced without them where fissures are absent. The Tribunal examined coordinate-Bench decisions (Imperial Granites Pvt. Ltd., Gem Granites and CCE v. Sri Vajra Granites Ltd.) which applied the Ballarpur test to identical facts and concluded that resin and ager are consumables and do not render the goods ineligible for the notification. Finding the issue no longer res integra and following those precedents, the Tribunal held that the exemption under notification No. 23/2003-CE is available to the appellant and the demands and penalties based on classification of these items as imported raw materials are unsustainable. [Paras 6, 7]

The appellant is entitled to the benefit of notification No. 23/2003-CE; demands, interest and penalties premised on treating epoxy resin and ager as imported raw materials are set aside.

Final Conclusion: Appeals allowed; impugned first appeal orders reversed and demands set aside as the epoxy resin and ager are held to be consumables and the appellant (100% EOU) is eligible for the exemption under notification No. 23/2003 CE.

Classification of absorbent cotton wool (non-medicated) - classification under Chapter Heading CETH 5601 2110 - classification under Chapter Heading CETH 3005 9090 - more specific tariff entry - later entry in the Central Excise tariff - demand for differential excise duty and consequential interest and penalties

Classification of absorbent cotton wool (non-medicated) - classification under Chapter Heading CETH 5601 2110 - more specific tariff entry - demand for differential excise duty and consequential interest and penalties - Absorbent cotton wool manufactured by the appellant is classifiable under CETH 5601 2110 and not under CETH 3005 9090, and the resulting demand, interest and penalties do not sustain. - HELD THAT: - The Tribunal considered the competing classifications urged by the parties and found the point already decided by coordinate Benches in Shanti Surgical Pvt. Ltd., and followed by the Principal Bench in Cotton Products India and Jajoo Surgicals Pvt. Ltd. The Bench accepted the view that the entry CETH 5601 2110 constitutes a more specific (and later) tariff entry applicable to non medicated absorbent cotton wool, displacing the department's reliance on CETH 3005 9090. Applying that ratio, the impugned demand for differential excise duty could not be sustained; consequential demands for interest and penalties founded on that classification similarly fell away. The Tribunal therefore set aside the Order in Original and allowed the appeal. [Paras 5]

Impugned order set aside; appeal allowed; demand, interest and penalties quashed.

Final Conclusion: The Tribunal held that the appellant's non medicated absorbent cotton wool falls under CETH 5601 2110 (being a more specific and later tariff entry), set aside the demand framed for the period 01.04.2008 to 14.10.2010 and quashed the consequential interest and penalties; appeal allowed.

Challenge to clause (g) of section 2(23) of the Gujarat Value Added Tax Act, 2003 - definition of "sale" in indirect tax law - division between tax on goods and services - constitutional validity of a taxation provision - interim injunction against coercive recovery - leave to amend pleadings

Leave to amend pleadings - amendment of prayer clause - Leave to amend the prayer clause was permitted. - HELD THAT: - The Court allowed the petitioner to amend the prayer clause. This grant of leave to amend was recorded at the outset of the order and no conditions or limitations were imposed in the oral order.

Petitioner granted leave to amend the prayer clause.

Challenge to clause (g) of section 2(23) of the Gujarat Value Added Tax Act, 2003 - definition of "sale" in indirect tax law - division between tax on goods and services - constitutional validity of a taxation provision - interim injunction against coercive recovery - A rule was issued on the constitutional validity of clause (g) of section 2(23) of the Gujarat Value Added Tax Act, 2003; notice ordered to the Advocate General; interim restraint on coercive recovery pursuant to the impugned assessment order dated 15.3.2019 was granted. - HELD THAT: - The Court noted the petitioner's contention that clauses in the statutory definition of "sale" split matters governed by Article 366(29A) and thereby seek to tax supply of goods made as part of a service, contrary to constitutional demarcation between tax on goods and services. Reliance placed on authoritative decisions was noted. In view of the constitutional question raised, the Court issued Rule returnable on the listed date, directed Issue Notice to the Advocate General, and by way of interim relief restrained the respondents from taking any coercive steps to recover amounts pursuant to the impugned assessment order dated 15.3.2019. The petition is directed to be heard with the specified Special Civil Applications.

Rule issued on the constitutional validity of clause (g) of section 2(23) GVAT Act; notice to Advocate General; respondents restrained from coercive recovery under the impugned assessment order dated 15.3.2019.

Final Conclusion: Leave to amend the prayer clause was permitted; in view of a substantial constitutional challenge to clause (g) of section 2(23) of the Gujarat Value Added Tax Act, 2003 the Court issued a Rule, directed notice to the Advocate General and granted interim protection by restraining coercive recovery under the impugned assessment order; the petition is to be heard with the listed Special Civil Applications.

Exclusion of agricultural land from definition of 'urban land' under the Explanation to section 2(ea)(v) - definition of 'assets' for levy of wealth-tax under section 2(ea) - proof of agricultural use by reference to revenue records (khasra, girdawari) - relevance of absence of declared agricultural income to claim of agricultural use - penalty for furnishing inaccurate particulars and concealment under section 18(1)(c) of the Wealth tax Act

Exclusion of agricultural land from definition of 'urban land' under the Explanation to section 2(ea)(v) - proof of agricultural use by reference to revenue records (khasra, girdawari) - definition of 'assets' for levy of wealth-tax under section 2(ea) - Whether the land held by the assessee for the assessment years 2011-12, 2012-13 and 2013-14 was agricultural land used for agricultural purposes and therefore excluded from 'urban land' and from the definition of 'assets' chargeable to wealth tax. - HELD THAT: - The Tribunal examined revenue records placed on file (khasra and girdawari) which showed cultivation of paddy and wheat on the land. It applied the Explanation to section 2(ea)(v) and held that land which is classified as agricultural in Government records and is used for agricultural purposes is not to be treated as 'urban land' and hence is not an 'asset' for wealth tax purposes. The Tribunal rejected the Departmental contention that absence of declared agricultural income negated agricultural use, relying on the decision in ITO v. Gomantak Eximis Ltd. that revenue records evidencing agricultural operations are sufficient to establish agricultural use even if agricultural income was not shown. The Tribunal distinguished CWT v. Officer in Charge (Court of Wards), Paigah on facts, observing that unlike in Paigah, the present case has contemporaneous revenue records showing actual cultivation. Applying these conclusions to the facts, the Tribunal set aside the inclusion of the land in the assessable net wealth and directed the Assessing Officer not to include the said urban land used for agriculture in the list of assets for wealth tax. [Paras 12, 14, 16, 17, 18]

Addition of the land to net wealth was set aside; the land was held to be agricultural and excluded from assets chargeable to wealth tax for AYs 2011 12, 2012 13 and 2013 14.

Penalty for furnishing inaccurate particulars and concealment under section 18(1)(c) of the Wealth tax Act - consequential effect of setting aside assessment additions on penalty initiation - Whether initiation of penalty proceedings under section 18(1)(c) was justified in view of the inclusion of the land in net wealth. - HELD THAT: - The Assessing Officer had initiated penalty proceedings on the basis that the assessee furnished inaccurate particulars and concealed wealth by not filing a timely return. The Tribunal's primary decision set aside the addition of the land to net wealth on the ground that it was agricultural and not an asset for wealth tax purposes. Given the reversal of the assessing officer's conclusion that the land formed part of net wealth, the basis for initiation of penalty proceedings (as recorded in the assessment order) no longer subsists in relation to the impugned asset. The Tribunal allowed the appeals which necessarily disposes of the connected addition and the attendant penalty proceedings initiated on that premise.

Penalty proceedings premised on the addition are not sustained in view of the set aside of the inclusion of the land in net wealth; appeals allowed.

Final Conclusion: The Tribunal allowed the assessee's appeals for AYs 2011-12, 2012-13 and 2013-14, holding that the land in question was agricultural and used for agricultural purposes (as evidenced by revenue records) and therefore excluded from 'urban land' and from assets chargeable to wealth tax; the consequential initiation of penalty proceedings based on the addition is not sustained.